Rev. Proc. 76-31

Section 1. Background and Purpose.

.01 The Employee Retirement Income Security Act of 1974 ("ERISA"), Pub. L. 93-406, 88 Stat. 829, 1974-3 C.B. 1, approved September 2, 1974, made substantial changes relating to the qualification requirements applicable to employee plans under sections 401(a), 403(a), and 405(a) of the Internal Revenue Code of 1954.

.02 In recognition of the need to provide an immediate and complete set of interim guidelines to facilitate (1) adoption of new employee plans, and (2) prompt amendment of existing employee plans, in conformance with the requirements of the Code as amended by ERISA, the Internal Revenue Service and the Department of Labor have issued a compendium of rules and regulations (referred to as the "ERISA Guidelines" and attached hereto as Appendix A).

.03 This Revenue Procedure establishes a special procedure (referred to as the "Special Reliance Procedure"), the principal feature of which is a reliance rule which generally assures that, for employee plans which comply with the Special Reliance Procedure, the qualification rules will be treated as fixed for a certain period ("Reliance Period") so that they can be relied upon for drafting employee plans, and amendments thereto, without regard to subsequent changes in the ERISA Guidelines. The Special Reliance Procedure may be followed in conforming employee plans to the requirements of ERISA and section 301(d) of the Tax Reduction Act of 1975. Sec. 2. Definitions.

.01 "Employee plan" or "plan" means (1) a pension, annuity, profit-sharing, stock bonus, or bond purchase plan, or (2) an employee stock ownership plan under section 301(d) of the Tax Reduction Act of 1975. Unless otherwise indicated or clearly required by context, the term employee plan or plan includes an individually designed, multiple employer, multi-employer, master or prototype plan.

.02 "ERISA Guidelines" means the compendium of rules and regulations of the Service and the Department of Labor which must be observed to satisfy the qualification provisions of the Code as added or amended by ERISA and the parallel requirements of parts 2 and 3 of subtitle B of Title I of ERISA, or where applicable, the requirements of section 301(d) of the Tax Reduction Act of 1975. The rules and regulations comprising the ERISA Guidelines are listed in Appendix A.

Sec. 3. Conditions For Special Reliance.

.01 Except as provided in sections 4, 5, and 7.02, an employer adopting an employee plan or amendments thereto shall be entitled to rely upon the ERISA Guidelines (relating to the requirements for qualification under sections 401(a), 403(a) and 405(a) of the Code) during the Reliance Period as set forth in section 7.01, if

(1) the plan is adopted or amended on or before September 30, 1976,

(2) the plan complies with requirements of the Code which were not changed by the enactment of ERISA,

(3) the plan complies with the requirements set forth in the ERISA Guidelines, and with respect to areas not covered by the Guidelines, the plan employs provisions which are reasonable in light of the circumstances and which give effect to the intent of the statute as indicated in the legislative history, and

(4) the plan provisions necessary to comply with any such ERISA Guideline are made effective as of the first date to which such guideline is applicable.

.02 A plan or amendment is considered to be adopted when it has been reduced to writing and approved by the employer (including in the case of a corporate employer any necessary action of the board of directors and the shareholders) notwithstanding that (a) no amounts have been contributed under the plan, and (b) the effective date of such plan or amendment is after September 30, 1976. See also section 3.04.

.03 With regard to a plan which complies with the requirements of sections 3.01(1) and (4) but does not comply with the requirements of sections 3.01(2) or (3) the plan will be deemed to have met the requirements of sections 3.01(2) and (3) provided that

(1) the plan is submitted to the Service for an advance determination letter on or before the last day of the third month following the date specified in section 3.01(1), and

(2) such plan is amended retroactively, in accordance with the requirements of section 401(b) of the Code and the regulations thereunder, to the extent necessary to comply with sections 3.01(2) and 3.01(3).

.04 In the case of a plan described in section 413(a) or (c) of the Code, a plan amendment will be deemed to be adopted under section 3.02 when there is a legally enforceable agreement to establish or amend such a plan by the employer.

.05 The requirement of section 3.01(1) will not fail to be satisfied with respect to any employer merely because such employer adopts a plan described in section 413(a) or (c) of the Code, or becomes part of a plan maintained by another employer, after September 30, 1976, if at least one employer adopts such plan on or before such date.

.06 The provisions of this section can be illustrated as follows:

A calendar year taxpayer adopts a new plan on November 30, 1974, with a plan year commencing October 1, 1974. As of November 30, 1974, all actions required by the employer to adopt the plan have been completed. This adoption satisfies the requirement of section 3.01(1) because it was adopted before September 30, 1976. The employer is eligible for the Special Reliance Procedure only if the other requirements of section 3.01 are satisfied. However, if the employer requests a determination letter as to the qualified status of the plan on or before December 31, 1976, and if the employer corrects any defect in the plan (in accordance with section 3.03(2)) retroactively to October 1, 1974, such employer is eligible for the Special Reliance Procedure with respect to such plan.

Sec. 4. Master and Prototype Plans.

.01 Except as provided in section 7.02 below, an employer who adopts a master or prototype plan or whose previously adopted master or prototype plan is amended shall be entitled to rely upon the ERISA Guidelines during the Special Reliance Period as set forth in section 7.01, if

(1) the sponsoring organization submits the plan to the National Office of the Service for an opinion letter in compliance with Rev. Proc. 75-51, 1975-2 C.B. 590, or Rev. Proc. 75-52, 1975-2 C.B. 592, on or before September 30, 1976,

(2) the requirements of sections 3.01(2), (3), and (4) are satisfied,

(3) the sponsor obtains a favorable opinion letter, and

(4) the employer adopts the master or prototype plan either as a new plan or as a restatement of an existing plan (whether or not a master or prototype plan), or, in the case of a previously adopted master or prototype plan, adopts any necessary amendments to related plan documents, retroactively effective for all purposes not later than the later of (a) June 30, 1977, or (b) the last day of the month that is six months after the month in which a favorable opinion letter is issued by the Service to the sponsoring organization. The requirement of this paragraph regarding necessary amendments to related plan documents is deemed satisfied in the case of a plan which is part of an existing master or prototype plan where the amendments made by the sponsoring organization bring the plan into compliance without any additional action by the employer.

.02 The requirements of section 4.01(1) shall be deemed to be satisfied unless the opinion letter contains a statement that the Special Reliance Procedure is not applicable to the master or prototype plan.

.03 In the case of an employer that adopts a master or prototype plan otherwise eligible to receive a determination letter, district offices will not honor a request for a determination letter while a request for an opinion letter with respect to the plan is pending before the National Office.

.04 The Service will publish in the Internal Revenue Bulletin,

(1) after September 30, 1976, a list of the sponsoring organizations and their related plans which satisfy the requirements of section 4.01(1), and

(2) lists of sponsoring organizations and their related plans which

(a) receive unfavorable opinion letters, or

(b) withdraw their requests for opinion letters.

In the case of a sponsoring organization which establishes a new master or prototype plan to replace an existing master or prototype plan in lieu of amending such existing master or prototype plan, such new master or prototype plan will be listed as a continuation of such existing master or prototype plan if the sponsoring organization notifies the Internal Revenue Service of such continuation in writing before September 30, 1976. Such written notification shall be sent to Commissioner of Internal Revenue, Washington, D.C. 20224, Attention: E:EP:T.

.05 A participating employer whose master or prototype plan is not included in the list described in section 4.04(1) may obtain the benefits of this Revenue Procedure by satisfying the requirements of section 3 or 5. However, for this purpose the date specified in section 3.01(1) shall be extended to the last day of the month which is six months after the month of publication of such list.

.06 A participating employer whose master or prototype plan is included in one of the lists described in section 4.04(2) may obtain the benefits of this Revenue Procedure by satisfying the requirements of section 3 or 5. However, for this purpose the date specified in section 3.01(1) shall be extended to the last day of the month which is six months after the month of publication of such list.

.07 A participating employer who amends a plan and satisfies the requirements of section 3 or 5 in lieu of adopting or retaining the sponsoring organization's approved plan may obtain the benefits of this Revenue Procedure. However, for this purpose the date described in section 3.01(1) shall be extended to the last day of the month which is six months after the month in which a favorable opinion letter is issued by the Service.

.08 For the purposes of sections 4.05, 4.06, and 4.07, a participating employer means an employer who participates in a master or prototype plan on any date on or after the date the sponsoring organization satisfies section 4.01(1) or, in the case of a sponsoring organization which does not satisfy section 4.01(1), who participates therein on September 30, 1976.

Sec. 5. District-Approved Pattern Plans.

.01 Except as provided in section 7.02 below, an employer who adopts a district-approved pattern plan ("pattern plan") or whose previously adopted pattern plan is amended shall be entitled to rely upon the ERISA Guidelines during the Special Reliance Period as set forth in section 7.01 below, if

(1) on or before September 30, 1976, a law firm submits the pattern plan to the Service for a notification letter in compliance with Rev. Proc. 76-15, 1976-1 C.B. 553.

(2) the requirements of sections 3.01(2), (3), and (4) are satisfied,

(3) the law firm obtains a favorable notification letter, and

(4) the employer adopts the pattern plan (or, in the case of a previously adopted plan, adopts any necessary amendments retroactively effective for all purposes) no later than the later of (a) June 30, 1977, or (b) the last day of the month which is six months after the month in which the law firm receives a favorable notification letter.

.02 The requirements of section 5.01(1) shall be deemed to be satisfied unless the notification letter contains a statement that the Special Reliance Procedure is not applicable to such pattern plan.

.03 An employer who adopts a pattern plan which has been submitted by a law firm, on or before September 30, 1976, with a request for a notification letter in compliance with Rev. Proc. 76-15, may obtain the benefits of this Revenue Procedure by satisfying the requirements of section 3 or 4, if

(1) such law firm receives an unfavorable notification letter,

(2) such law firm withdraws such request, or

(3) such employer amends such plan in lieu of retaining such law firm's approved plan.

However, the date specified in section 3.01(1) shall be extended to the last day of the month which is six months after the month in which such law firm receives an unfavorable notification letter, withdraws such request, or receives a favorable notification letter (whichever is applicable).

Sec. 6. Employee Stock Ownership Plans Under the Tax Reduction Act of 1975.

.01 Except as provided in section 7.02, an employee stock ownership plan ("ESOP") which is intended to meet the requirements of section 301(d) of the Tax Reduction Act shall be entitled to rely upon the ERISA Guidelines relating to such section during the Special Reliance Period, if

(1) the requirement of section 3.01(1) is satisfied,

(2) the plan complies with the requirements set forth in the ERISA Guidelines applicable to plans intended to meet the requirements of such section 301(d) and, with respect to areas not covered by the Guidelines, the plan employs provisions which are reasonable in light of the circumstances and which give effect to the intent of section 301(d) of such Tax Reduction Act as indicated in the legislative history, and

(3) the plan provisions necessary to comply with the ERISA Guidelines are made effective as of the beginning of the first plan year to which the requirements of section 301(d) are applicable.

.02 With regard to a plan which does not comply with section 6.01(2), the plan will be deemed to have met the requirements of section 6.01(2) provided that

(1) the plan is submitted to the Service for an advance determination letter pursuant to Rev. Proc. 75-48, 1975-2 C.B. 583, on or before the date described in section 3.03(1), and

(2) such plan is amended retroactively, in accordance with section 301(d)(11) of the Tax Reduction Act.

Sec. 7. Reliance Period.

.01 General--Except as provided in section 7.02 (relating to unusual circumstances) any employee plan which satisfies the provisions of sections 3, 4, 5, or 6 of this Revenue Procedure shall be deemed to have satisfied the requirements of (1) the provisions of sections 401(a), 403(a) or 405(a) of the Code which were added or amended by ERISA and the parallel provisions of parts 2 and 3 of subtitle B of Title I of ERISA or (2) section 301(d) of the Tax Reduction Act, for the entire period from the beginning of the first plan year to which the requirements are applicable to such plan until December 31, 1977. In general, therefore, an employee plan which has been adopted or amended in compliance with sections 3, 4, 5, or 6 of this Revenue Procedure prior to the effective date of any rule or regulation adopted under section 7.02 will not be required to comply with such rule or regulation during the Reliance Period.

.02 Exception for Unusual Circumstances--In unusual circumstances, the Service or the Department of Labor may issue rules and regulations amending or supplementing the ERISA Guidelines which are made effective prior to the expiration of the Reliance Period applicable to a particular employee plan. This exception for unusual circumstances will be availed of by the Service or the Department only where it appears that a fundamental error or omission in the ERISA Guidelines is likely to affect significantly a number of employee plans. Any rule or regulation remedying an omission or correcting an error will generally be made effective, for plans which shall have complied with the Special Reliance Procedure, no sooner than 30 days after the publication of such rule or regulation. However, the Service and the Department of Labor reserve the right to make such a rule or regulation applicable to such a plan during the Reliance Period where, for example, the benefits of employees could be significantly curtailed by a delay in compliance with such a rule or regulation.

.03 An employee plan which is adopted or amended in compliance with sections 3, 4, 5, or 6 more than 30 days after the effective date of a rule or regulation adopted under section 7.02 shall be required to comply with such rule or regulation at the time of such adoption or amendment.

.04 Subject to the requirements of section 411(a)(10) and (d)(6) of the Code and sections 203(c)(1) and 204(g) of ERISA, reliance on the ERISA Guidelines during the Reliance Period will not be affected merely because the plan is adopted or amended to conform to any change in the ERISA Guidelines promulgated by the Service or the Department of Labor.

Sec. 8. Required Amendments.

.01 A plan which is entitled to the benefit of this Special Reliance Procedure must, no later than January 1, 1978, comply with changes in the ERISA Guidelines affecting (1) the qualification requirements of section 401(a), 403(a), or 405(a) of the Code and the parallel provisions of parts 2 and 3 of subtitle B of Title I of ERISA, or (2) the requirements of section 301(d) of the Tax Reduction Act, whichever is applicable. Any such plan will be treated as satisfying such requirements if

(1) it is amended on or before December 31, 1978, to satisfy the requirements of such changes, and

(2) the amendment is effective no later than January 1, 1978.

.02 If a sponsoring organization submits an amendment described in section 8.01(1) to the National Office of the Service for an opinion letter on or before July 1, 1978, then the date described in section 8.01(1) shall be extended to the last day of the month which is six months after the month in which the opinion letter is issued by the Service, if that date is later than the date specified in section 8.01(1).

.03 If a law firm submits an amendment described in section 8.01(1) to the Service for a notification letter on or before July 1, 1978, then the date described in section 8.01(1) shall be extended to the last day of the month which is six months after the month in which the notification letter is issued by the Service, if that date is later than the date specified in section 8.01(1).

.04 An employer, other than an employer in a master or prototype plan designed to benefit self-employed individuals within the meaning of section 401(c)(1) of the Code, may request a determination letter under 26 CFR section 601.201(o) of the Statement of Procedural Rules or under Rev. Proc. 75-48 with respect to plan amendments which are described in section 8.01(1). Such request may be made without filing any application forms, whether or not it also includes plan amendments other than those described in section 8.01(1). The applicant must include a statement indicating that such request is made pursuant to this subsection. In considering such request the Service will limit its consideration to the following:

(1) changes described in section 8.01 that are not reflected in the plan as amended, and

(2) the effect of such amendment on the qualification of the plan under section 401(a), 403(a), or 405(a).

Sec. 9. Effect on Other Requirements.

.01 Nothing in this Revenue Procedure alters the requirement that a plan must be in existence and communicated to the covered employees by the close of the employer's taxable year in order to be qualified for such taxable year. .02 Nothing in this Revenue Procedure alters the requirement, for purposes of section 301(d) of the Tax Reduction Act, that an ESOP and accompanying trust must be in existence on or before the last day for making an election under section 46(a)(1)(B) of the Code, i.e., the due date (including extensions of time) for filing the corporation's income tax return for the year in which the credit is earned or, if later, December 31, 1975.

.03 Nothing in this Revenue Procedure alters the requirement that to be qualified a plan must be qualified in operation as well as form. The reliance described in section 7.01 does not extend to plans that are or become disqualified in operation.

.04 Nothing in this Revenue Procedure alters the fact that, to obtain assurance that a plan satisfies the requirements of section 401(a), 403(a), or 405(a) of the Code with respect to the facts peculiar to a particular employer adopting either (1) an approved master or prototype plan not covering any self-employed individual within the meaning of section 401(c)(1), or (2) a pattern plan referred to in section 5, such employer must obtain a determination letter.

Sec. 10. Effect on Other Documents.

Rev. Proc. 75-47, 1975-2 C.B. 581; Rev. Proc. 75-48, 1975-2 C.B. 583; Rev. Proc. 75-51, 1975-2 C.B. 590; Rev. Proc. 75-52, 1975-2 C.B. 592; and Rev. Proc. 76-15, 1976-1 C.B. 553, are hereby modified.

Sec. 11. Effective Date.

This Revenue Procedure is effective November 5, 1975.

                             Appendix A.